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First-time homebuyers see new opportunities, challenges in pandemic economy – The Globe and Mail

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With mortgage rates at historic lows and price growth tapering in certain markets, the COVID-19 pandemic has presented both opportunities and challenges for first-time homebuyers.

New buyers are seeing condo prices come within reach in downtown areas awash with vacant high rises. But young families are also being priced out of starter homes in suburbs at a faster rate.

“From first-time homebuyers what I’m seeing is a lot of people reaching out, really since the summer, and trying to understand: Is it the right time for them to buy?” said Patrick McKinnon, a sales representative at One Group Toronto Real Estate.

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“They’re seriously considering doing so now while they still have the opportunity . it is the best time it’s been to buy all year.”

For the group of buyers drawn to entry-level condos, McKinnon says, the conditions are ripe. Buyers, often in their 20s, have an opportunity to live downtown or potentially have a rental property down the line.

But for buyers who spent their 20s and early 30s renting in cities and are ready to settle down, there aren’t too many deals to be had. Suburban markets that were once affordable are now out of reach as existing homeowners, armed with big gains on equity in their properties, bid up suburban homes.

In the Greater Toronto Area in November, prices were up nearly 20 per cent year-over-year in Durham region, more than 22.5 per cent in Oshawa, Ont. and nearly 14 per cent in Brampton, Ont. Considering the average home price in the Toronto area has more than doubled, growing from $395,234 to $819,288 between 2009 and 2019, equity can be an advantage.

Brampton real estate agent Bethany King said that of all the homebuyers she sees, first-time purchasers are in the toughest spot.

“With so much pent-up demand, our entry-level pricing has officially shifted, and it’s becoming more and more expensive for them,” said King, a team leader at Century 21 Millennium Inc. brokerage.

The Quebec Professional Association of Real Estate Brokers has highlighted a similar trend, noting that adults aged 18 to 34 are now less tethered to a physical workspace, as COVID-19 has widened acceptance of work from home. But as the suburbs become more career-friendly, this same group is more likely to have had their finances negatively impacted during the pandemic, the real estate association said.

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“(Experienced) buyers are in a better financial position to take advantage of real estate market opportunities and move up in product and price,” said Charles Brant, director of market analysis at the QPAREB, in a statement this month.

While Canadians generally saved more money during the pandemic, Statistics Canada noted that millennial-led households faced greater economic risk this year. These younger workers, Statistics Canada said, have higher costs of entry to housing and less equity in financial and real estate assets – and are also more likely to work in industries more deeply impacted by the pandemic.

“Now, the overall affordability is better with these lower interest rates, and so that’s why we’re seeing people purchase (homes),” said Paul Beaudry, Deputy Governor of the Bank of Canada, in a recent question-and-answer session.

“The difficulty is really down payments for young people. If you can get in, it’s not that costly to carry the cost of a house in terms of the interest rate cost. What’s hard is actually getting in.”

Ottawa has taken note. The government’s fall economic statement said it would expand eligibility for the first-time homebuyer incentive by raising the maximum house price for the incentive from about $505,000 to about $722,000 next year.

An online poll released by RBC this month indicated that Canadians were willing to give a child or family member an average of $60,513 to help them buy a home, as about 58 per cent of respondents said it was almost impossible to buy a home on their own. Nonetheless, about 81 per cent of respondents said homeownership was a good investment.

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According to the polling industry’s generally accepted standards, online surveys cannot be assigned a margin of error because they do not randomly sample the population.

That draw to buying a home as an investment comes even as the average rent for Canadian properties listed on Rentals.ca fell more than nine per cent between November 2019 and November 2020.

Prospective buyers who may be under the impression that real estate prices only go up should consider the plight of those who bought condos in Toronto before prices fell this year, cautioned Hilliard MacBeth, an investment adviser and author of “When the Bubble Bursts: Surviving the Canadian Real Estate Crash.”

While prices may be coming down for city condos, MacBeth said maintenance fees, insurance and taxes can still make them far from affordable compared to rentals. Plus, he says, young buyers could find they don’t have the equity to move up in a few years, if prices fall more.

“A whole bunch of first-time buyers from five years ago, and three years ago and two years ago, that bought these condos in the centre of Toronto – now they’re stuck,” says MacBeth.

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Economy

Canadian retail sales slide in April, May as COVID-19 shutdown bites

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december retail sales

Canadian retail sales plunged in April and May, as shops and other businesses were shuttered amid a third wave of COVID-19 infections, Statistics Canada data showed on Wednesday.

Retail trade fell 5.7% in April, the sharpest decline in a year, missing analyst forecasts of a 5.0% drop. In a preliminary estimate, Statscan said May retail sales likely fell by 3.2% as store closures dragged on.

“April showers brought no May flowers for Canadian retailers this year,” Royce Mendes, senior economist at CIBC Capital Markets, said in a note.

Statscan said that 5.0% of retailers were closed at some point in April. The average length of the closure was one day, it said, citing respondent feedback.

Sales decreased in nine of the 11 subsectors, while core sales, which exclude gasoline stations and motor vehicles, were down 7.6% in April.

Clothing and accessory store sales fell 28.6%, with sales at building material and garden equipment stores falling for the first time in nine months, by 10.4%.

“These results continue to suggest that the Bank of Canada is too optimistic on the growth outlook for the second quarter, even if there is a solid rebound occurring now in June,” Mendes said.

The central bank said in April that it expects Canada’s economy to grow 6.5% in 2021 and signaled interest rates could begin to rise in the second half of 2022.

The Canadian dollar held on to earlier gains after the data, trading up 0.3% at 1.2271 to the greenback, or 81.49 U.S. cents.

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith in Toronto, editing by Alexander Smith)

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Economy

Canadian dollar notches a 6-day high

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Canadian dollar

The Canadian dollar strengthened for a third day against its U.S. counterpart on Wednesday, as oil prices rose and Federal Reserve Chair Jerome Powell reassured markets that the central bank is not rushing to hike rates.

Markets were rattled last week when the Fed shifted to more hawkish guidance. But Powell on Tuesday said the economic recovery required more time before any tapering of stimulus and higher borrowing costs are appropriate, helping Wall Street recoup last week’s decline.

Canada is a major producer of commodities, including oil, so its economy is highly geared to the economic cycle.

Brent crude rose above $75 a barrel, reaching its highest since late 2018, after an industry report on U.S. crude inventories reinforced views of a tightening market as travel picks up in Europe and North America.

The Canadian dollar was trading 0.3% higher at 1.2271 to the greenback, or 81.49 U.S. cents, after touching its strongest level since last Thursday at 1.2265.

The currency also gained ground on Monday and Tuesday, clawing back some of its decline from last week.

Canadian retail sales fell by 5.7% in April from March as provincial governments put in place restrictions to tackle a third wave of the COVID-19 pandemic, Statistics Canada said. A flash estimate showed sales down 3.2% in May.

Still, the Bank of Canada expects consumer spending to lead a strong rebound in the domestic economy as vaccinations climb and containment measures ease.

Canadian government bond yields were mixed across a steeper curve, with the 10-year up nearly 1 basis point at 1.416%. Last Friday, it touched a 3-1/2-month low at 1.364%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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Economy

Toronto Stock Exchange higher at open as energy stocks gain

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Toronto Stock Exchange edged higher at open on Wednesday as heavyweight energy stocks advanced, while data showing a plunge in domestic retail sales in April and May capped the gains.

* At 9:30 a.m. ET (13:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 16.77 points, or 0.08%, at 20,217.42.

(Reporting by Amal S in Bengaluru; Editing by Sriraj Kalluvila)

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